Glencore, the IPO and how to make shedloads of money

The Swiss Commodity traders Glencore has announced its initial public offering (IPO) of shares to arrange a subsequent upswing in the market. The commercial logic of the move seems convincing. The corporate governance side less so.

The announcement of the IPO drew attention to a secretive corporation. At first the news was mostly on the scale and timing of the IPO. The company offering of $11 billion shares set a corporate value of around $60 billion. The IPO documentation alerted journalists to remuneration paid to its cadre of top traders. I couldn’t help thinking of the advertisement to be seen as you arrive at Geneva airport “Money talks but wealth whispers.” The Swiss have developed a well-justified reputation for financial discretion.

The remuneration packages of Glencore’s traders dwarfs the average payout by banks to their star employees. For example, Glencore’s London-based oil traders earn almost four times the average paid to Barclays Capital’s investment bankers.

Say what you like about Simon Murray, the veteran Hong Kong entrepreneur appointed to chair Glencore, but he cannot be accused of dullness. The choice of a 71-year-old polar adventurer and former French Foreign Legionnaire as chairman of Glencore always promised to be entertaining and so it has proved. Murray created a furore with his views on women in the boardroom, making it clear he wouldn’t be rushing to recruit any.

In contrast, someone who was appointed a director was Tony Hayward, the man at the centre of the BP oil-spill disaster. However, the BBC’s top business commentator Robert Peston was forced to retract a story that Lord Browne, Haywood’s mentor and former boss at BP, was to become chairman of the new floated company and at the same time revealed the appointment of Simon Murray. According to Peston, Lord Browne was rather too keen on conforming to corporate governance guidelines.

Ivan Glasenberg [CEO, pictured above] will become one of Europe’s richest men after Glencore’s initial public offering, as the value of his stake will surge to almost $10 billion. Glencore priced its initial public offering on Wednesday [April 3rd] at a level that will give the commodities trading house a current valuation of between $48 billion and $58 billion.

City custom and practice

The Financial Times suggested that in time-honoured city practice, “Glencore set the price of the IPO below expectations in hope of stock rally”. Which, if I understand the euphemism is really good news to those who have signed up to the floatation. Words like “money, shedloads of” cross the mind.